Start-ups and employment dynamics within and across sectors
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We use a decade of longitudinal data on start-ups and employment in Swedish regions to analyze the effect of start-ups on subsequent employment growth. We extend previous analyses by decomposing the effect of start-ups on total employment change into within- and cross-sector effects. We find that start-ups in a sector influence employment change in the same as well as in other sectors. The results illustrate that the known S-shaped pattern can be attributed to the different effects of start-ups in a sector on employment change in the same sector and in others. Start-ups in a sector have a positive impact on employment change in the same sector. The effects on employment change in other sectors may be negative or positive, and depend on the sector under consideration. In particular, start-ups in high-end services deviate from manufacturing and low-end services in that they have significant negative impacts on employment change in other sectors. The findings are consistent with the idea that start-ups are a vehicle for change in the composition of regional industry.
KeywordsEntrepreneurship Employment growth Regional development Start-ups
JEL ClassificationsJ23 L26 M13 O52
We are grateful for comments from Michael Fritsch, Marcus Dejardin, Kristina Nyström, and two anonymous referees that substantially improved earlier versions of this paper. We also thank Jan Andersson at Statistics Sweden for support with data issues. Martin Andersson acknowledges financial support from the Swedish Governmental Agency for Innovation Systems (VINNOVA) and from the EU sixth framework program (MICRODYN project).
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